Shares were down by 3% as Greggs reported a 14% drop in pre-tax profit for the first half of the year, as winter storms and summer heatwaves kept customers away from its high street shops, adding to an already challenging consumer environment.
The bakery chain, known for its sausage rolls and steak bakes, said profits fell to £63.5m in the six months to the end of June, down from £74.1m a year earlier. While total sales rose 7% to £1.03bn, the increase was not enough to offset a decline in margins and footfall.
Company-managed shop like-for-like sales rose 2.6%, while franchised locations grew 4.8%. Greggs, which operates more than 2,600 stores across the UK, said the decline in profits “reflected challenging market footfall and the phasing of cost headwinds that have particularly impacted the first half of the year.”
“These challenges were compounded by heavy snow and strong winds in January and unusually hot weather in June, which had a material impact on consumer behaviour and lowered like-for-like sales,” the company said.
More than 200 shops in Scotland and Wales were temporarily closed during Storm Éowyn in late January, when a rare red warning was issued due to hurricane-force winds, heavy rain, and snow.
Cost inflation was also a factor, with overall cost pressures running at 5.4% in the first half. Full-year cost inflation is expected to be around 6%. Greggs spent £3m on expanding manufacturing, logistics, and technology capabilities, and completed 108 shop refurbishments, up from 81 a year earlier.
Chief executive Roisin Currie described the first half as a “challenging market” with weak consumer confidence. “People are saving, not spending,” she said.
The interim dividend was held steady at 19p. While full-year sales are expected to remain resilient, profits are forecast to come in “modestly below the level achieved in 2024.”
Mark Crouch, market analyst at eToro, said: “Greggs’ 14% drop in first-half profit caps a bitter 10 months for the UKs favourite baker.
“Management blames hot weather for weaker sales, but that doesn’t account for a 50% collapse in market value. The more plausible culprit is the timing of Greggs expansion strategy, stretching margins, just as the consumer picture turns more fragile.
“Greggs has long been a reliable read on the UK high street. Its sudden stumble suggests consumers may not just be cooling on sausage rolls, but that appetite across the high street may be waning more broadly.
“With inflation easing and real wages recovering, the macro backdrop should, in theory, be supportive. That it isn’t showing up in Greggs’ numbers, is a red flag.
“Greggs’ brand still holds a strong place in the market, but scale isn’t helping if margins and volumes can’t keep up. The pressure is now squarely on management to regain the initiative, and not just blame it on the weather.”